Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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An investor is considering starting a new business. The company would require $500,000 of assets, and it would be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 15.0%
return on the invested capital , which means that the firm must have an ROE of 15.0%. How much net income must be expected to warrant starting the business?
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The term net income is the income left with the company after adjusting the revenues for all the operating expenses of the company, and the return on equity is the return that is generated by the company in relation to the equity.
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